EIP-1559: Separating Mechanisms From Memes

EIP-1559 has the dubious honor of being Ethereum's Most Misunderstood Upgrade™. Despite many years passing since EIP-1559 was activated as part of the London fork (Aug. 2021), misconceptions about the upgrade still persist today.

A decent number of these myths are result of the "Ultrasound Money" movement emphasizing EIP-1559's base-fee burning mechanism (and the consequential reduction in supply of Ether) and hitching ETH's "deflationary issuance" on this feature.

However, EIP-1559 was clearly conceived as an upgrade to Ethereum's fee mechanism to improve UX and make the chain economically sustainable--not to accrue value to ETH by burning ETH or reduce gas fees as claimed in certain circles. Post-EIP1559, the following things have happened:

• Transaction waiting times have reduced (e.g., due to more predictable gas pricing mechanics for users)
• Fee volatility on Ethereum has decreased (e.g., due to block sizes dynamically expanding to cope with market demand)
• Ethereum's transaction fee mechanism has become resistant to manipulation by sophisticated actors (100% of base fees are burned, rendering those bribes to validators useless)

This report (https://research.2077.xyz/eip-1559-separating-mechanisms-from-memes) from 2077 Research dives deep into EIP-1559's design--analyzing the historical context for changing Ethereum's transaction fee mechanism--and debunks certain misconceptions around EIP-1559's design goals. We also discuss the benefits of EIP-1559 in more detail and touch (briefly) on multidimensional fee markets and similar improvements on the original EIP-1559 proposal.

PS: A tweet thread summarizing the article's main takeaways is available on X: https://x.com/2077Research/status/1830618981146743270